Master10 Proprietary Question Bank - Automated scraping, spidering, or harvesting is strictly prohibited.
India Cluster33 Verified Questions
Money Market Instruments GK Questions & Answers
The Indian money market constitutes the wholesale financial mechanism for short-term funds with maturities up to one year, operating under the regulatory jurisdiction of the Reserve Bank of India pursuant to Section 45W of the RBI Act of 1934. Structural reforms recommended by the Sukhamoy Chakravarty Committee (1985) and the N. Vaghul Working Group (1987) established modern short-term liquidity instruments. Sovereign Treasury Bills (T-Bills) are issued at a discount to face value in tenors of 91, 182, and 364 days through electronic auctions on the RBI Negotiated Dealing System, with a minimum investment denomination of ₹25,000. Commercial Paper (CP), introduced in January 1990 as an unsecured promissory note by highly rated corporate borrowers to meet working capital requirements, mandates a minimum credit rating of A2 from SEBI-registered rating agencies, with maturities ranging from 7 days to one year in multiples of ₹5 lakh. Certificates of Deposit (CDs), introduced in 1989, are securitized negotiable money market instruments issued by scheduled commercial banks and select All-India Financial Institutions in minimum tranches of ₹5 lakh. Interbank liquidity is balanced via Call Money (overnight), Notice Money (2 to 14 days), and Term Money (15 days to one year), cleared through the Clearing Corporation of India Limited.
High-yield conceptual summaries for competitive exams and rapid revision.
The Reserve Bank of India regulates the Indian money market under powers conferred by Section 45W of the Reserve Bank of India Act, 1934.
Treasury Bills (T-Bills) are short-term sovereign debt instruments issued at discount and redeemed at par in tenors of 91, 182, and 364 days.
The minimum subscription amount for Treasury Bills is ₹25,000 and in multiples of ₹25,000 thereafter, auctioned on the NDS-OM platform.
Cash Management Bills (CMBs) are non-standard short-term discount instruments introduced by RBI in 2010 to meet temporary fiscal mismatches under 91 days.
Commercial Paper (CP) was introduced in India in January 1990 based on recommendations of the Vaghul Working Group on the Money Market.
Commercial Paper can be issued in denominations of ₹5 lakh and multiples thereof, with maturity periods ranging between 7 days and 1 year.
Eligible CP corporate issuers must hold a minimum net worth of ₹4 crore and a minimum credit rating of A2 from a SEBI-registered rating agency.
Certificates of Deposit (CDs) were introduced in 1989 and are issued by Scheduled Commercial Banks and select All-India Financial Institutions.
Certificates of Deposit have a minimum issuance denomination of ₹5 lakh and are issued at a discount to face value in dematerialized form.
Banks cannot grant loans against Certificates of Deposit, and buyback is permitted only subject to RBI master directions after a lock-in period.
Call Money refers to interbank borrowing and lending for a single day (overnight) without collateral requirements.
Notice Money denotes interbank borrowing and lending transactions exceeding 1 day and up to 14 days without requiring collateral.
Term Money transactions refer to interbank borrowing and lending operations spanning between 15 days and 1 year in maturity.
Triparty Repo (TREPS) replaced CBLO (Collateralized Borrowing and Lending Obligation) in November 2018, administered by CCIL as a triparty agent.
Discount and Finance House of India (DFHI) was established in 1988 by RBI jointly with public sector banks to provide liquidity to the money market.
easyFinancial Terms, Money Markets & Capital Instruments
In the Indian money market, what is the inter-bank lending and borrowing market called when funds are borrowed or lent for a tenure of exactly 1 day (overnight)?
Verified Explanation
In Indian money market operations: 1 day (overnight) transactions are 'Call Money', 2 to 14 days are 'Notice Money', and 15 days to 1 year are 'Term Money'.
2ID: GK-BANK-00104
mediumFinancial Terms, Money Markets & Capital Instruments
In the Indian money market, if funds are borrowed or lent for a period between 2 days and 14 days without collateral, what is the transaction termed?
Verified Explanation
Under RBI money market operating guidelines, money lent or borrowed for a tenure from 2 days up to 14 days is termed 'Notice Money'.
3ID: GK-BANK-00109
mediumFinancial Terms, Money Markets & Capital Instruments
What is the minimum denomination in which Commercial Paper (CP) can be issued by eligible corporate borrowers in the Indian money market?
Verified Explanation
Commercial Paper (CP) is issued in denominations of ₹5 Lakh and multiples thereof, with maturity ranging between a minimum of 7 days and a maximum of up to 1 year.
4ID: GK-BANK-00012
easyFinancial Terms, Money Markets & Capital Instruments
The outright purchase and sale of Government Securities in the open market by the RBI to inject or absorb rupee liquidity is known by which term?
Verified Explanation
Open Market Operations (OMOs) involve the outright purchase or sale of government securities by the central bank in the secondary market to regulate durable liquidity conditions.
5ID: GK-BANK-00211
mediumHistory of Indian Banking & Nationalisation
Which entity acts as the centralized administrator and benchmark administrator for major Indian money market and interest rate benchmarks such as Mumbai Interbank Outright Rate (MIBOR)?
Verified Explanation
Financial Benchmarks India Private Limited (FBIL) was jointly established in December 2014 by FIMMDA, FEDAI, and IBA to develop, administer, and publish benchmark financial rates in India.
6ID: GK-BANK-00228
hardFinancial Terms, Money Markets & Capital Instruments
Under Section 45W of the Reserve Bank of India Act, 1934, what comprehensive regulatory power is vested in the Reserve Bank regarding financial markets?
Verified Explanation
Section 45W of the RBI Act empowers the RBI to determine policy and give directions to all agencies dealing in money market instruments, foreign exchange transactions, derivatives, and repo transactions.
7ID: GK-BANK-00379
mediumFinancial Terms, Money Markets & Capital Instruments
What specific open market monetary intervention is known as 'Operation Twist', executed by the RBI to manage long-term bond yields?
Verified Explanation
Operation Twist involves the simultaneous purchase of long-term government securities (injecting long-term liquidity and depressing yields) and sale of short-term treasury bills to flatten the yield curve without altering durable liquidity.
8ID: GK-BANK-00440
mediumFinancial Terms, Money Markets & Capital Instruments
What is the primary mechanism of 'Operation Twist' conducted by the Reserve Bank of India in the open market?
Verified Explanation
Operation Twist involves the simultaneous purchase of long-dated securities and sale of short-term treasury bills to lower long-term yields and flatten the term structure of interest rates.
9ID: GK-BANK-00501
mediumFinancial Terms, Money Markets & Capital Instruments
What simultaneous open market operation is executed by the RBI under 'Operation Twist' to flatten the yield curve?
Verified Explanation
In 'Operation Twist', the RBI simultaneously buys long-dated government bonds (to lower long-term yields) and sells equal amounts of short-dated Treasury Bills/bonds (absorbing liquidity) without altering the net monetary base.
10ID: GK-BANK-00110
mediumFinancial Terms, Money Markets & Capital Instruments
Which zero-coupon, discounted short-term debt instruments are issued by the Government of India for standard tenures of 91 days, 182 days, and 364 days?
Verified Explanation
Treasury Bills (T-Bills) are short-term promissory notes issued at a discount to face value by the RBI on behalf of the Central Government with standard tenures of 91, 182, and 364 days.